How Low Can Bank of America’s Deposit Account Rates Go?

I’m amazed that the big banks like Bank of America are able to increase their deposit levels when their rates are so low. That is what I was thinking when I was reviewing Bank of America’s fourth quarter earnings report. Here are a few excerpts from the report:

Period-end Consolidated Deposit Balances Increased $14 Billion to Record $1.12 Trillion
[...]
Average deposit balances for the quarter of $528.8 billion increased $44.7 billion, or 9 percent, from the year-ago quarter. The increase was driven by growth in liquid products in the current low-rate environment and the $20 billion average impact of deposit transfers primarily from Global Wealth and Investment Management (GWIM). The average rate paid on deposits declined to 8 basis points in the fourth quarter of 2013 from 16 basis points in the year-ago quarter, due to pricing discipline and a shift in the mix of deposits.

As you can see, deposits increased and the average rate paid on deposits declined. Bank of America credited the decline of the average rate partly to "pricing discipline" which sounds like a euphemism for offering low deposit account rates.

Bank of America was profitable. In fact, Bank of America, Chase and Wells Fargo have reported earnings for the fourth quarter that have exceeded expectations. According to this CNN article:

Bank of America impressed Wall Street Wednesday with better-than-expected earnings and revenue for the fourth quarter, continuing a trend of solid results from the nation's largest banks.
[...]
The company's consumer and business banking division, which includes branch banking and loans for small businesses, reported a $2 billion profit, up nearly 40% from a year earlier.

So with deposits and profits increasing, banks can offer very low interest rates. You can see how low by looking at Bank of America’s rate sheet. Here are a couple of examples as of 1/24/2014:

0.03% 1-year CD

0.15% 5-year CD

If you have any CD maturing at Bank of America, I don’t see any reason to renew it. Make sure you don’t let any CDs automatically renew. If you did that at Bank of America, you could be stuck in a CD with a very low rate. So make sure you review your options well before the end of the CD grace period.

Paying some of the lowest deposit rates to it's customers is of no concern to Bank of America...

"Bank of America Corp., the second-biggest U.S. lender, took in more investment-banking fees than larger rival JPMorgan Chase & Co. (JPM) for the first time since acquiring Merrill Lynch & Co. during the financial crisis. Fees for debt and equity issuance, as well as advice for activities including mergers, rose 17 percent to $6.41 billion last year at Charlotte, North Carolina-based Bank of America. That edged out New York-based JPMorgan’s $6.33 billion in such revenue for the first time since 2008. Bank of America’s investment-banking operations, run by Christian Meissner and overseen by Chief Operating Officer Thomas Montag, benefited from a record year in debt underwriting as corporations took advantage of all-time low rates for junk bonds ahead of Federal Reserve plans to withdraw stimulus."

Re #9:"If I don't like it" the remedy is very easy and I enjoy higher rates of return on my deposits. I just take my business to credit unions. In the United States, credit unions are not-for-profit organizations that exist to serve their members rather than to maximize corporate profits.

Bank of America continues to intrigue me, but in a good way. After I wrapped up my venture with AMEX Blue Cash cc (before they split into two entities) they solicited me for their credit card, at 1% return. However, there were two pieces of paper added to the piece of mail, one stating I would receive double (2%) and the other stating that if I waited to cash out until $300, I would get an additional .5%. I tried it, and sure enough, I got $450 the first cash out, credited to my cc (2.5%). The second cash out, it was now .25% add'l. Still, it was $375. I'm coming close to cash out #3; I can see within the account online that I am still getting the 2%, and am curious as to what will happen this time. Even if it's "only" 2%, my guess is that it has advantages over the Fidelity 2%, as that's an AMEX card. I calculated my first year with the B of A card that I got $65 by putting my cable and Geico insurance on it for automatic deductions. I have never seen my version of the card profiled anywhere. Why they came after me as I carry no debt makes no sense, but why complain?

The one bright spot of such low rates is that if you inadvertently let a certificate renew, you can close it and pay a very low early withdrawal penalty (since the penalty is calculated based on the current interest rate).

Perhaps it was true in 2011 (the year of the link you cite); but as far as I can tell, B of A's current deposit agreement dated 10/18/13 states that a 5-year CD early withdrawal penalty is 365 days of interest.

Big banks feel no need at this time to pay anything to depositors for the following reasons: the largest profit center is their brokerage/financial advisory services not traditional banking; many of their existing loans are at very low rates so they will pay even lower rates to depositors; Fed policy continues to favor banks and let's them make easy profits; any additional capital needs can be met through issuing bonds and brokered CDs which raise more capital at lower servicing costs with call provisions and no withdrawal option for the consumer other than selling the CD in the secondary market; and finally the big banks are primarily interested in transaction fees like credit/debit fees and penalty fees rather than traditional loans like car loans. So the bottom line is for better deposit rates into the foreseeable future go with credit unions and smaller banks that actually focus on traditional banking services rather than pushing financial products such as annuities and load mutual funds.

We live in an age of Low Information Consumers (LIC's) who with knowledge literally at their fingertips are just plain stupid, accept ridiculous terms for goods and services and blindlessly follow the herd. They are an offshoot of the Low Information Voter (LIV), the same idiots that voted the current WH administration in not once but TWICE! Some of these morons are both and are, you guessed it, Low Information Beings (LIB's).

BofA takes advantage of the fact that most people are just too lazy to either (a) do 60 seconds of research or (b) change where they bank (even more appalling when you consider you're not changing a checking account or other such account that would be a lot of hassle... we're just talking a 5yr CD here).

Of course, this is a free country, and you're free to get 0.15% for your money at BofA, instead of 3.04% currently at PenFed.

As PT Barnum said... "There's a sucker born every minute..." And BofA sure has found a lot of them lately...

I have a rewards charge card with them which gives me 3% rebate on gas, 2% on food shopping and 1% on all else. Have just a checking (free) with Chase (branch right near my house. All CD's and savings with CU's or banks that pay high rates.

My recent experience with bank of america it is terrible. My son is in the navy and we have been with BofA for some time with no issues but, at this moment he is deploy overseas and all his accounts have been frozen for over a week. They lie about sending out correspondence and phone calls, bouncing me all over from one departmen to another, and the situation was never resolved. I spent hrs at the branch the same no solution and the worst my son was over seas puting his life in the line of duty for the safety and security of the country and did not have acces to his funds. I am very displeased with the way that the corporation manage this situation, the discriminatory way that they treat my son. they acted more like immigration than a financial institution. if I have to rate the branch I will give -10 and no starts

If you can live with potential fees, you may want to consider a new checking account bonus that Bank of America is advertising on its home page. The amount of the bonus varies based on your state. There's a $100 bonus for 18 states and D.C. An additional $100 bonus is available in 3 states. For most of the other states, the bonus is $75. Like the last promotion, the bonus requires direct deposit. However, this new promotion doesn't have any mention of a specific amount that is required for...

With the 10-year Treasury yield falling below 1.40%, it's likely that we'll see fewer CDs with yields over 2.00%. Currently, there is one large bank that still has a 2% CD. It's Bank of America. As of 7/25/2012, Bank of America's top CD rate is 2.10% APY. This is listed at Bank of America's MyExpression Banking page for Defenders of Wildlife. This may require opening the CD online. It may not be available at a branch. The MyExpression Banking CD rates are 10 basis points higher than the regular CD...

If you can live with potential fees, you may want to consider a new $100 checking account bonus that Bank of America is advertising on its home page. Thanks to DA reader larkin who mentioned this in the forum. Details of the offer are listed in the BofA promotions page. There appears to be two slightly different offers for two groups of states. The offer codes are different and one has a $2,000 direct deposit requirement while the other doesn't list a specific amount for direct deposit. For both cases...

Yesterday's WSJ article on Bank of America, Big Bank Weighs Fee Revamp, has re-awakened anger over new checking account fees. In my opinion, the WSJ article didn't have much new info. As I reported last June, Bank of America started phasing in new checking accounts with more fees in three states. There was supposedly a plan to roll out these new checking accounts nationwide by the end of this year. This new WSJ article basically reports that this rollout is still planned:

After all the customer complaints, protests and news reports, the big banks have decided to give up on the debit card fees. Today Bank of America "cried uncle" on its home page:

It seems like the banks were hoping that customers would accept the new debit card fees. The banks probably thought they had a good excuse based on the new debit card regulation that took effect in October. In today's environment when there's so much anger at the banks, that excuse just isn't acceptable.